The decay of brand equity

Although they may have ceased their commercial activity, brands do not immediately lose their assets. Learnt through time, their brand image is not erased from consumer’s long-term memories. Indeed, after many years a brand can still evoke a number of positive or negative associations. What is lost however is the key brand asset: brand salience, the capacity of the brand to be evoked spontaneously in consumer’s minds as soon as the need to buy the product type appears.

This is why belonging to the consumer ‘evoked set’ (or consideration set) is a key measure of brand equity, signifying both brand presence and its perceived unique relevance for that need.

Table below illustrates how brand equity decays over time. Brand X is a FMCG food brand in a very popular category (with almost 100 per cent penetration). Until recently, this brand was the number two in its market. Then it was bought by market number three, which immediately sold all Brand X’s factories so that the acquisition of the brand paid off immediately. Most important, it discontinued its activity and as a result became the market number two in volume and number one in value.

Eight years after the end of any kind of commercial activity, the brand equity had not disappeared. Top-of-mind awareness had dropped from 13 per cent to 5 per cent and aided awareness from 86 per cent to 55 per cent. Interestingly, there are still 13 per cent of consumers who declare that they have bought it at least once over the preceding 12 months. This latter figure casts doubts on the validity of such indicators of brand equity in this FMCG category: it seems to be a mere reflection of spontaneous awareness.

How brand equity decays over time

How much would this brand be worth if its owner decided to sell it? Not far from zero. The owner would never take the risk of selling it so that it could be revived in its own market. Out of this market, it is just a name with faded remote credentials: there will be no buyer. Could the owner itself revitalise that brand? Probably in specific segments or niches. As far as the mainstream market is concerned, a return to the shelves would be impossible.

They are now overcrowded, first by private labels, and second by the few remaining producer’s brands, which have become megabrands. Typically, a shift of channel would be possible. For instance, a drink brand might be sold via on-premise distribution (for consumption in canteens and business restaurants), if this were a channel where it could add value without meeting fierce competition. Channel and use changes are a classic form of revitalisation for this very reason.

This example illustrates a fact too often overlooked: the value of a brand does not lie in its assets, but in the ability of a company to make a profitable business with these assets. After eight years of inactivity the whole commercial environment will have changed. Nature abhors a vacuum, and business does too. As soon as the brand disappears from the stores, the shelves are filled with other products from other brands, including the distributor’s own brand.

In order to sell the original again, they would need to be displaced. It costs a lot to induce the modern distribution to reallocate space for a comeback, with very little guarantee of success. A brand is not enough to stage a comeback, one needs an innovation.

It is clear why it is essential to prevent decline, and how a brand loses value after a period of inactivity. But what are the factors of decline?

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating Between Brandassets, Strength And Value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing Against Distributor's Brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What Is New About Brand Extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited Complex Portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The decay of brand equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving The Delicate Local–global Balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions